‘ June 3, 2015
When Sean Taylor looks at China’s soaring stock prices, he sees a market more disconnected from economic fundamentals than at any other time in a two-decade career.
His advice to investors? Keep buying.
The London-based head of emerging markets at Deutsche Asset & Wealth Management, whose developing-nation equity fund has outperformed 94 percent of peers tracked by Bloomberg this year, says what matters most in China right now is that policy makers have the motivation and firepower to keep the world-beating rally going. Rising stock prices not only help Chinese companies reduce debt levels by selling new shares, they also make it easier for the government to boost budget revenue and push forward on privatization plans through stake sales. One way policy makers can support further gains is through further monetary stimulus: banks’ reserve requirement ratios are almost 6 percentage points higher than the 15-year average, even after two cuts this year.
‘The government wants a strong stock market, to privatize more companies and do more IPOs,’ Taylor, whose firm oversees about $1.3 trillion, said in an interview in Hong Kong. He has an overweight position in Chinese shares.
The Shanghai Composite has gained 141 percent in the past 12 months, the most among major global benchmark indexes. The gauge closed little changed today.
This post was published at David Stockmans Contra Corner by Kana Nishizawa Bloomberg.
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